VIX Options Haven't Been This Popular Since 2015

VIX put open interest is at its highest point since 2015, while call options are nearing February's record high

by Andrea Kramer |

Published on Mar 16, 2017 at 11:44 AM
Updated on Mar 17, 2017 at 12:46 PM

While the CBOE Volatility Index (VIX) has been relatively quiet in recent months, VIX options traders have not. The stock market's "fear gauge" has spent 2017 mostly dancing between 11 and 13, and neither yesterday's Fed decision nor the Dow's triple-digit drop a couple weeks ago could push the VIX out of its range, sending up a rare signal. However, traders have been accumulating VIX options at a rapid-fire rate, either to bet on or hedge against a volatility spike.

cboe volatility index (VIX) daily chart


VIX put open interest is at its highest point since October 2015, with 3.2 million contracts outstanding. Meanwhile, VIX call open interest is in the 99th percentile of its annual range, and is on the cusp of taking out February's record of 8.4 million VIX calls opened. As of yesterday's close, 8.2 million VIX calls were open.

 

VIX option open interest
Chart courtesy of Trade-Alert


The 12 strike is most popular among VIX put holders, with about 307,000 and 264,000 contracts docked at the March and April 12 puts, respectively. However, six of the 10 most populated VIX strikes are out-of-the-money March calls, including the top three. Most notably, the deep out-of-the-money March 18 and March 17 calls are the most populated strikes of any series, home to about 367,000 and 340,000 contracts, respectively. Taking the "bronze," so to speak, is the March 16 call, with nearly 317,000 contracts in residence.

As Schaeffer's V.P. of Research Todd Salamone noted in this week's Monday Morning Outlook, "To the extent that some of this call open interest represents hedges to the enormous VIX futures net short position among large speculators (as noted in the weekly Commitments of Traders report), the risk of a volatility pop is dampened a bit, as this is a group that will not panic if appropriately hedged." However, as he's stated before, "it's just after a boatload of VIX calls expire that a risk of a volatility pop increases," and the aforementioned front-month VIX calls expire less than a week from today, on Wednesday, March 22.


Don't miss Schaeffer's free weekly stock market forecast. Sign up now for Monday Morning Outlook.
JOIN FREE

Get Schaeffer's Opening View every morning before the bell rings.


MORE | MARKETstories


2 Stocks Tanking After Earnings
Atlassian stock is at a record high after an encouraging earnings report
Understanding In-, At-, and Out-of-the-Money Options
The pros and cons of buying ITM, ATM, and OOTM calls and puts
Bullish Options Traders Cheer On Rallying Box Stock
The tech stock has seen heavy call buying recently
The S&P is Blazing Its Hottest Streak in 4 Years
The stock market index could extend its string of record highs, if past is prologue

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

TRADING SERVICES | FEATUREDproducts


By MG 2016
In March of 2016, I was introduced to Expiration Week Countdown.  The results are better than words!
Options trading made simple.
Schaeffer's Investment Research, Inc. is dedicated to providing subscribers advantages in options trading and investing.  Our independent market research services create profitable opportunities for investors at every level.